What is the Iraqi Dinar (IQD)?
The Iraqi dinar refers to Iraq’s national currency and is represented by ISO code IQD. Iraq’s Central Bank issues the Iraqi dinar, which earlier consisted of 1000 fils. However, fils are no longer used because inflation has rendered them obsolete, and now dinars have become the smallest currency unit in use.
- The Iraqi Dinar refers to Iraq’s national currency and is represented by ISO code IQD.
- The Iraqi dinar carries less value outside the country since the country’s prime export – crude oil – is priced in USD.
- Legitimate forex exchange in the USD/IQD currency pair is practically non-existent.
History of the Iraqi Dinar
The Iraqi dinar was put into circulation in 1932 and replaced the Indian rupee, which was the national currency since the British occupation in World War I. The Iraqi dinar remained tied to the British pound until 1959, after which it was pegged to the United States dollar at a rate of 1 IQD = 2.80 USD, without a change in value.
Iraqi dinar did not follow the devaluation of the US currency in 1971 and 1973 and increased to 3.38 USD before the value of the IQD reduced to 3.22 USD due to a 5% devaluation. The rate continued until the Gulf War, though the black-market rate was about six times higher in late 1989.
Following the 1991 Gulf War, subject to UN sanctions, the formerly used Swiss printing method became unavailable. Hence, new and lower quality notes were made, while the previously created notes came to be known as the Swiss dinar and continued to be used in Iraq’s Kurdistan Region. The sanctions enforced by the global community and the United States, together with excessive printing by the government, rapidly devalued the new dinar notes.
At the end of 1995, 1 USD was priced at 3,000 IQD. New notes were released again in 2003; however, at that time, they were of higher quality so that the whole country could use a single currency. While the old Iraqi dinars were exchanged with new Iraqi dinar notes on a one-to-one basis, the Swiss notes were replaced at a rate of 150 new notes for one Swiss note.
The Iraqi Dinar and Scams
The Iraqi dinar carries very less value outside the country since the prime export of the country – crude oil – is priced in USD. Even so, several schemes try to get people to buy dinars in expectation of future price growth. Multiple institutions and publications alert investors not to invest in IQD scams.
Usually, brokers selling Iraqi dinar in cash charge a 25% to 30% premium over the official rate. Entities who buy the currency risk major losses immediately after buying it. Selling IQD is also challenging since there is practically no demand outside Iraq. Brokers usually bid 30% under the formal exchange rate if anyone wants to sell Iraqi dinars to them. The transaction costs could be decreased from 60% to 40% of the invested capital if there is no change in the exchange rate.
Legitimate forex exchange in the USD/IQD currency pair is practically non-existent. Major banks do not offer trade-in Iraqi dinars. IQD is only available for purchase or sale by selected brokers or money exchangers, who may or may not be legally authorized. As mentioned, the brokers or money exchangers typically charge a fee of 30% or more over and above the authorized exchange rate.
Purchasing and selling IQD could lead to a loss of 50% without any movement in the exchange rate. In 2012, Iraq was preparing to redenominate IQD, but not to revalue it. Without revaluation, the value of the Iraqi dinar is unlikely to increase.
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